Commercial Metals (CMC) 11/6/09 PriceWatch Alert With Support Around $14.22

Posted: Friday, November 06, 2009 8:32 AM EDT
By: Market Intelligence Center Staff

Commercial Metals (NYSE: CMC) closed yesterday at $14.69. So far the stock has hit a 52-week low of $6.25 and 52-week high of $21.29. Commercial Metals stock has been showing support around 14.22 and resistance in the 15.04 range. Technical indicators for the stock are Bearish and S&P gives CMC a neutral 3 STAR (out of 5) hold rating. CMC appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at a Mar '10 12.50 covered call (CMC CV) for a net debit in the $11.59 area. That is also the break even stock price for this trade. This covered call has a 134 day duration, provides 21.10% downside protection and a 7.85% assigned return rate for a 21.39% annualized return rate (comparison purposes only). A lower cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the CMC Jan '11 5 Call (ZXN AA) and selling the Mar '10 12.50 call (CMC CV) for a $6.75 debit. The trade has a 134 day life and would provide 20.01% downside protection and an 11.11% assigned return rate for a 30.00% annualized return rate (for comparison purposes only). Commercial Metals has a current annual dividend yield of 3.32%. [FBB-Seven Summits Research]